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Reverse Mortgages Issued Under New Rules Outstrip Old, Age Gap Narrows

Reverse mortgages issued under the new, post-October 2 principal limit factor rules have surpassed those originated under the old structure, according to a new analysis from Baseline Reverse.

Among the 6,339 loans securitized so far in 2018 — which includes data from January, February, and March — 3,642 were originated under the 2017 PLFs, with the remaining 2,697 issued under the old, higher principal limits. That’s a shift from the January data, which showed 2017-vintage Home Equity Conversion Mortgages accounting for just 45% of the overall total.

More promisingly, a shift toward older borrowers seen in last month’s data seems to be moderating, according to Baseline Reverse founder Dan Ribler.

“It looks like the trend was more an anomaly than a trend, and it looks like the good news is that younger borrowers are not being scared away by the program changes,” Ribler told RMD. “The impact is not age-specific, which is excellent.”

In addition, while the HECMs originated under the new rules show a greater prevalence of lower adjustable-rate margins — validating industry concerns about fiercer margin competition in the post-October 2 landscape — the typical margin seems to be settling in the 2.5% to 2.75% range.

It’s true that some lenders have offered low margins, including a few loans at 1%, but Ribler said that hasn’t taken hold across the industry.

“Somebody did it, but I don’t think the market has reset to a 1% margin,” he said.

So far, among loans securitized in January and February, reverse mortgages originated under the new rules have an average maximum claim amount of $317,485, as compared to $348,551 for those issued under the old, 2014-era principal limit factors.

Principal limit factors among the new-rule loans came in at an average of $162,640, against $205,083 for the old-rule loans.

Written by Alex Spanko